Annual report pursuant to Section 13 and 15(d)

LEASES

v3.24.1
LEASES
 12 Months Ended
Dec. 31, 2023
Leases  
LEASES

NOTE 13 – LEASES

 

The components of lease cost for operating leases for the years ended December 31, 2023 and 2022 are as follows:

           
    2023     2022  
Lease Cost                
Operating lease cost   $ 468,997     $ 524,036  
Short-term lease cost     215,289       263,277  
Variable lease cost     –       –  
Sublease income     –       –  
Total lease cost   $ 684,286     $ 787,313  

 

Supplemental cash flow information related to leases for the years ended December 31, 2023 and 2022 are as follows:

           
    2023     2022  
Other Lease Information                
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flows from operating leases   $ 359,347     $ 354,340  
Amortization of right-of-use assets   $ 369,774     $ 430,644  

 

The following table summarizes the lease-related assets and liabilities recorded on the balance sheet at December 31, 2022 and 2021:

           
    2023     2022  
Lease Position                
Operating Leases                
Operating lease right-of-use assets   $ 1,136,213     $ 1,505,987  
Right-of-use liability operating lease - short- term     399,611       391,117  
Right-of-use liability operating lease - long-term     775,170       1,143,011  
Total operating lease liabilities   $ 1,174,781     $ 1,534,128  

  

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company did not recognize any initial right-of-use asset and lease liabilities during the year ended December 31, 2022.

     
    December 31, 2023  
Lease Term and Discount Rate      
Weighted-average remaining lease term (years)        
Operating leases     2.7  
Weighted-average discount rate        
Operating leases     6.82%  

 

The following table provides the maturities of lease liabilities at December 31, 2023:

     
    Operating  
    Leases  
       
2024   $ 471,638  
2025     485,702  
2026     340,591  
Total future undiscounted lease payments     1,297,931  
Less: Interest     (123,148 )
Present value of lease liabilities   $ 1,174,783  

 

The Company closed its Denver, Colorado, store location (the Company’s only store) in June 2022 and entered into a lease termination agreement in July 2022 to relieve the Company of its future obligations under the lease. The Company has recorded a loss of $148,322 in the year ended December 31, 2022 related to this facility which includes the write-off of prepaid rent, security deposit, right-of-use asset and liability and a loss on the write-off of leasehold improvements and fixtures and furniture of $46,289.

 

In July 2022, the Company entered into a new lease agreement for office space in Round Rock, Texas with the landlord of its current Round Rock facilities. The lease began in August 2022 and terminates in August 2026. In connection with signing this lease, the landlord has agreed to terminate the lease on one of the current facilities that would have expired in December 2023. The additional monthly rent after consideration of the rent on the facility being canceled is not significant. As discussed in Note 7 above, the Company terminated the lease, and related amendment, as of September 30, 2022 for a leased warehouse facility in conjunction with entering into the lease agreement for office space and the above does not include any amounts related to that lease. There was an insignificant impact to the Company’s operations for the year ended December 31, 2022 due to the termination of this lease.

 

The total loss on lease terminations for the years ended December 31, 2023 and 2022 was $85,756 and $378,176, respectively.